From paying taxes and liveable wages to advocating government regulations to protect the environment, we need proof corporations are changing.
By Joseph E. Stiglitz, February 7, 2020
This year marked the 50th anniversary of the World Economic Forum’s flagship meeting of the world’s business and political elites in Davos, Switzerland. Much has changed since my first Davos in 1995. Back then, there was euphoria over globalization, hope for ex-communist countries’ transition to the market, and confidence that new technologies would open up new vistas from which all would benefit. Businesses, working with government, would lead the way.
Today, with the world facing climate, environmental, and inequality crises, the mood is very different. Facebook, willing to provide a platform for mis-/disinformation and political manipulation, regardless of the consequences for democracy, has shown the dangers of a privately controlled monopolistic surveillance economy. Corporate leaders, and not just in the financial sector, have displayed remarkable moral turpitude.
Moreover, multilateralism is under attack. Its strongest defender historically, the United States, now has an administration committed to “America First,” and to undermining global cooperation, even as the need for cooperation in a host of areas – including peace, health, and the environment – becomes increasingly apparent.
This year’s meeting highlighted disenchantment with the increasingly dominant American model of shareholder-first, profit-maximizing firms. More than 50 years ago, WEF founder and head Klaus Schwab argued for stakeholder capitalism: enterprises should be accountable for the interests of their customers, workers, communities, and the environment, as well as their shareholders. Some 45 years ago, with Sandy Grossman, I showed in a standard economic framework that maximizing shareholder value would not maximize societal welfare. In speech after speech this year, business leaders and academics explained how Milton Friedman’s successful advocacy of shareholder capitalism led directly to the crises we face today – including, in the US, opioid addiction, childhood diabetes, declining life expectancy amid soaring “deaths of despair” – and the political divisions they have fueled.
Originally published in World Economic Forum. Read the entire story here.